Since at least 2017, Davis's long-range budget forecasts have told the same basic story: a squeeze on the general fund, which pays for police, fire, parks, street maintenance and most other services outside the utilities, followed by relief in the 2030s. In 2017, a 20-year forecast prepared for the city by consultant Bob Leland, then of Management Partners, projected the fund's balance declining to a low in the 2027-28 fiscal year and then rebuilding, with relief from rising pension costs coming "not before the 2030's." The 2019 forecast used the same words. On June 16, 2026, Leland, now with Baker Tilly, told the City Council the balance would sit below the city's 15% reserve goal from 2027-28 through 2032-33 and recover as pension costs level off and decline in the 2030s. (Davis's fiscal years run July through June.) City staff say they have worked with Leland on the forecast model for the last decade. Each of these is a projection of current policies, and the recovery depends on its assumptions holding.
Pensions are why the horizon keeps landing in the 2030s. The 2017 forecast said the general fund's pension costs were under $500,000 in 2000-01, when CalPERS had cut employer rates to near zero because of a "surplus," had grown 12-fold since, and would peak at $18 million in about 20 years. This year's forecast puts the growth since 2000-01 at 17-fold, driven mainly by unfunded liabilities that CalPERS charges like mortgage payments, which are being paid down, and says the future decline in costs "all depends on CalPERS investment returns." It assumes returns averaging 6.5%, below CalPERS's 6.8% assumption, no added staff and cost-of-living raises of about 2.5% a year. A reserve back at 15% also wouldn't mean the city's infrastructure is paid for: the 2017 forecast projected funding about two-thirds of street and bike path needs, the 2019 forecast 50% of all identified infrastructure needs, and this year's about 65% even if every dollar above the reserve goal goes to infrastructure.
The forecast in the 2014-15 proposed budget, written while Measure O, a half-cent sales tax increase estimated to raise $3.6 million a year, was on the June 2014 ballot, was far darker. Its main scenario, which assumed the tax passed along with $1.164 million in cuts, projected the general fund ending 2014-15 with $3.78 million and then "depleted gradually," to $690,000 by the end of 2018-19, and said additional cuts might prove necessary. A second scenario, without the tax, had the city running out of reserves early in 2015-16 and about $17 million short by the end of 2018-19, an outcome the forecast called "highly unlikely to play out." Voters approved Measure O.
The first year came out well ahead of that main scenario, by the city's own budget accounting. The 2015-16 budget estimated that the general fund ended 2014-15 with $10.2 million, 21% of spending, compared with the $3.78 million projected a year earlier. Most of the difference was revenue, estimated at $52.2 million against the forecast's $46.68 million; the starting balance was also $770,000 higher. Estimated spending of $48 million looked close to the forecast's $48.13 million, but only because $3.13 million of the year's spending had been carried over into 2015-16, which is why the city called the $10.2 million balance "artificially high." That budget described 2015-16 as the first year in many in which revenue would exceed spending, but that was after setting aside the carried-over spending; its own table, which counts it, showed $54.8 million in spending against $52.4 million in revenue, and a balance of $7.8 million, 15.4%, at the end of 2015-16.
The city's audited statements, which define the general fund's balance differently from its budget documents, show the same pattern for 2014-15. The budget as adopted planned to draw down the fund by $1.75 million that year; instead, the audit shows its balance rising $6.1 million, to $15.7 million. Revenue beat the final budget by $1.5 million, and capital spending came in $6 million below budget. Under the city's budget rules, unspent amounts that are encumbered roll over to the next year.
By the end of 2018-19, the last year of the 2014 forecast, the difference was far larger. The forecast's main scenario had the balance at $690,000. The city's 2020-21 budget put the general fund's available unreserved balance on July 1, 2019, at $21.3 million. The audited statements, which count the balance differently, show $25.2 million at June 30, 2019, almost all of it unassigned. Both revenue and spending had outgrown the 2014 projections: the city's actual general fund spending in 2018-19 was $64.4 million, compared with $53.7 million projected, and its June 2019 estimate of that year's revenue was $60.7 million, compared with $52.8 million. In this year's presentation, Leland's revenue history notes a strong recovery from 2012-13 through 2016-17 in revenue other than property and sales taxes, a cash-flow boost when the state's "triple flip" sales tax arrangement ended in 2015-16, and one-time streetlight conversion money. The 2014 forecast and later budgets don't necessarily define the general fund identically; the 2019-20 budget, for example, includes a separate general fund capital projects account.
The 2017 model also undershot. It projected the balance declining steadily from 20.5% of spending in 2016-17 to 3.8% in 2027-28, which it attributed to added infrastructure spending and higher pension costs, and put the balance at the end of 2018-19 at $9.8 million. Two years later, the 2019 update, which measures the balance as the total less nonspendable assets, estimated that figure at $17.4 million, 26.3% of spending. Even that was low: in June 2019, the city's adopted budget estimated the general fund would close 2018-19 with $16.6 million unreserved, and the next year's budget, on the same basis, reported $21.3 million available, with spending $2.1 million below the June estimate. The 2019 update moved the projected low point to 7.5% in 2023-24, and 7.6% in 2024-25. In June 2024, staff presented a 2024-25 budget with a 7.5% reserve, half the 15% goal, after more than $3.5 million in deferrals or one-time reductions; that is a budgeted figure, not an audited result.
Part of the pattern is built into the method. The forecasts start from the city's budgets, and the city tends to spend less than it budgets. The 2017 forecast noted that if it didn't account for vacant positions, "the City would always experience a 'windfall' at the end of the year." For 2022-23, the city's annual financial report showed general fund spending $8 million below the final budget, mainly because projects paid for with federal pandemic relief had been budgeted but not yet carried out, along with conservative spending. This year's forecast says its assumption that the city spends its full 2025-26 budget "may be high for expenses."
Later years are harder to score. The 2019 forecast projected a general fund balance of $5.8 million at the end of 2022-23, and $65.8 million in revenue that year. The audit shows a balance of $23.5 million, $18.9 million of it unassigned, and $79.9 million in revenue. But the 2019 forecast came before the pandemic; one-time federal relief flowed into the general fund from 2021-22 through 2023-24, including $4.8 million of American Rescue Plan Act money counted as replacement revenue in 2022-23; and the park tax and public safety charges were moved into the general fund in 2021-22, so the projected and audited totals don't cover the same revenue.
The sales tax measures can be checked only in part, because the city's audited statements report its local taxes together with its share of the statewide sales tax. Measure O's half-cent was estimated at $3.6 million a year. The 2014 forecast's scenarios with and without it differ by $2.7 million in revenue for 2014-15 and $3.6 million for 2015-16; the city's annual financial report for 2014-15 said general fund sales tax rose $3.0 million that year because of the half-cent increase. The renewal of the full 1% tax on the March 2020 ballot, also called Measure Q, was described as providing about $8.6 million a year, and the 2019 forecast projected $8.68 million for 2019-20; the city's annual financial report for 2019-20 says the tax contributed $9.1 million to the general fund that year. Later figures, about $11 million cited by staff in June 2024 and a projection of $11.3 million for 2023-24, are estimates for later years that reflect growth since 2020 rather than a test of the 2020 estimate. The 2024 Measure Q, which added another 1%, took effect for vendors in April 2025, with the first revenue arriving in June 2025 and a full year's worth by July 2026; the city estimated it would raise $10 million to $11 million a year. Its first full fiscal year, 2025-26, hasn't been audited. This year's forecast credits it with $11.4 million a year, and in May staff lowered the 2026-27 sales tax projection by $0.5 million, in part to refine projections after Measure Q took effect.
The May 2025 forecast, the first after the 2024 Measure Q passed, compared plans rather than results: spending in the proposed budget for 2026-27 was $11.9 million higher than the 2023 forecast had projected for that year, and revenue $1.7 million lower. Those are changes in the city's plans and assumptions, not measured forecasting errors. The presentation said some of the costs were unavoidable and others resulted from labor agreements and budget priorities. A June 2024 staff report had pointed to construction costs across California rising 9% a year after the pandemic, the council's 2023 decision to bring all city positions up to the market median for total compensation, and a $1 million rise in PG&E costs. With Measure Q projected at $11.2 million in 2026-27, the 2025 forecast still showed a $2.8 million gap that year, under the heading "Structural Shortfall Preceded Measure Q." In June 2024, staff had said the new tax, with typical inflation and no other major spending changes, could restore the reserve to 15% within two fiscal years, or the council could choose to restore it more slowly so more of the new revenue went to other priorities. The 2026-27 budget the council adopted in June projects a reserve of $13.3 million, 13.7%, with revenue still about $2 million short of spending; the city manager plans to propose more ongoing savings in February 2027.
Grading these forecasts has limits. They project current policies forward to show where they lead, so that the council can change course, and a gloomy forecast that doesn't come true may partly reflect actions it prompted. The forecasts, the budgets and the audits don't all measure the general fund's balance the same way, so this story compares figures on the same basis where possible and labels the basis where not. The newest forecasts can't yet be checked against audits: as of Oct. 30, the city's financial reports page lists the 2023-24 audited report as its most recent and says the 2024-25 report is in progress, and in May staff said it expected to finish its outstanding audits by December 2026.